Business variable rate loan

Business variable rate loan

Businesses often need to borrow money over the long term, particularly to purchase large items such as new equipment, premises, or to invest in a new line of stock or to launch a new product or service. All of which will have a big impact on the success of the business.

There is a variety of ways to borrow money, if you want to borrow large amounts of money most people automatically think of taking out a loan. Banks and other lenders will be able to offer a business variable rate loan, which is a loan in which the interest rate charged on the outstanding balance varies according to the market interest rates.

If you want to borrow money, you will need to prove to the lender that your business is viable and that you will be able to pay back the loan. They may ask you for one or all of the following:

  • some form of security for the loan
  • a personal guarantee from a director
  • evidence that your business is financially stable- such as three years of accounts
  • proof of good credit history

For a young, start-up or new business some of these requirements may make getting a loan difficult, but don’t worry there are plenty of other business finance options available, that come with great benefits.

Alternatives to business variable rate loan

Some other business finance options include:

  • An agreed business overdraft
  • Asset leasing
  • Asset based finance
  • Invoice Finance- Factoring and Discounting

Whilst a business variable rate loan is great for providing you with that immediate injection of cash that you need, it isn’t the most flexible option. Not only are you committed to repaying it for three or more years, but you can’t predict how much your repayments will fluctuate in the future. Plus you are committed to making repayments each month, no matter if your circumstances change.

The benefits of Invoice finance

Invoice finance is an alternative finance option and it is gaining popularity. Unlike a loan, invoice finance doesn’t provide you with a lump sum that you have to pay off over time, but instead it releases money that you have already earned that is tied up in your unpaid invoices.

The benefits of Invoice finance are:

  • Its flexible
  • Its controllable
  • Its not a loan, you have already earned the money
  • The available working capital grows with your business
  • You don’t need to offer up assets as security

For further advice regarding business loans please contact us on 0800 597 4757 or apply online using the form opposite.